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FISCAL RESPONSIBILITY : TREASURY SINGLE ACCOUNT (TSA) AS A TOOL, MERITS AND DEMERITS.
FISCAL RESPONSIBILITY : TREASURY SINGLE ACCOUNT (TSA) AS A TOOL, MERITS AND DEMERITS. A paper prepared by AROGBO, J.GBENGA Esq. I would attempt to discuss the merits and demerits of TSA as a fiscal tool. I would start by defining Fiscal Responsibility. According to Tejvan Pettinger October 13, 2015, “Fiscal responsibility implies a government pursues the appropriate level of government spending and tax to: Maintain sustainable public finances”. The word "fiscal" relates to money generally and can comprise private finances, though it most often is used in reference to communal/ public money or government expenditure. In a governmental framework, a guarantee of fiscal responsibility is a government's promise that it will prudently spend, earn, and generate funds without placing undue hardship on its citizens. Fiscal matters in these settings engage everything from revenue from taxes and profits to investments or treasury assets. What is TSA? Let's look at a financial analogy by Oyedele Taiwo, a Tax Partner at PWC Nigeria. I call it the allegory of the TSA. “Imagine a rich businessman who has 28 wives and 542 children altogether a family of 571each managing a division or unit of the business empire. Some of the units are income generating while others are mere cost centres but all are meant to work together for the benefit of the family. Each unit manager is authorised to spend money based on pre-approval by the family head. For some reasons each unit prefers to keep their monies separate. By implication some divisions have to borrow to keep their operations running even as others may have cash surpluses not immediately required. Incidentally it costs far more to borrow than you get from savings thereby unnecessarily increasing the family's debt and related costs. It is even more painful knowing that some of the units end up borrowing the same excess funds kept with the money lenders by other units. The family head therefore directed all units to henceforth keep all their funds in a central account so that he can have a view of all revenue and expenses and so that there may be less need to borrow externally going forward. Well, the rich businessman is Nigeria. The wives are the ministries; the children are the various departments and agencies while the central account is the Treasury Single Account (TSA) which is a way of unifying various government bank accounts to give a consolidated view of government cash resources.” In the 2015, the total cost of debt service for Nigeria stood at N1 trillion this is about one-third of the total federal government revenue before borrowing. This is untenable therefore someone has to take responsibility for putting it in place. How Is TSA Run? With meticulous reference to Nigeria, the Central Bank has opened a Consolidated Revenue Account to accept all government revenue and effect expenses through this account. This is the Treasury Single Account. All Ministries, Departments and Agencies are anticipated to pay their revenue collection to this account through the Deposit money banks who act as collection agents. This implies that the money deposit banks will continue to retain revenue collection accounts for MDA's but all monies collected will have to be remitted to the Consolidated Revenue Accounts with the CBN at the end of each banking day. In other terms, MDA's accounts with money deposit banks must be zeroed at the end of every banking day by a total transfer of funds to the TSA. This implies that banks will no longer have access to the ‘glide' provided by the accounts they maintain for the MDA's. Diverse types of financial accounts may be maintained under a TSA and these may comprise the TSA main account, secondary or sub-accounts, operational accounts and zero balance account. Additional types of accounts could be operated e.g imprest accounts, transit accounts and correspondence accounts. These accounts are maintained for various call transaction purposes for funds flowing in and out of the TSA. TSA as an e-Collection scheme involves the planning for automated processing of all revenue attributable and accruing and being acknowledged by Federal Government of Nigeria, via Information Technology for full transfer of funds to a Central Vault in the CBN. The scheme is more rapid, swifter, and all aggregate Cash transferred electronically and values instantly given from Receiving Deposit Money Banks' to Collecting CBN. Large Volumes are aggregated rapidly and precisely. For flawless function of TSA and simplicity the Office of the Accountant General of the Federation issued the following categorization and exemption: MDAs fully funded through the National Budget All Ministries, relevant Departments and Agencies.......All receipts to go to the CRF / TSA MDAs not funded through the National Budget but generate additional revenues Teaching Hospitals, Medical Centre's, Federal Universities, Polytechnics, Colleges of Education, etc Collection Accounts to be maintained in CBN MDAs not funded through the National Budget but expected to pay operating surplus to the CRF i.e CAC, NPA, NCC, FAAN, NCAA, NIMASA, etc Collection Accounts to be maintained in CBN MDAs that are funded from the Federation Account NNPC, FIRS, Customs Service,DPR, etc All FAAC and CRF receipts to be paid into the designated accounts in CBN respectively. Agencies funded through the Special Accounts NSC, RMRDC, PTDF, etc Collection Accounts to be maintained in CBN MDAs with Revolving Funds and Project Accounts Drug Revolving Fund, Fertilizer Revolving Fund, Roll-Back Malaria, SureP, etc All Revolving Funds and Project Accounts to be kept in CBN Profit oriented public corporation / business enterprises BOI, NEXIM, BOA, Transcorp Hilton, etc...Policy not applicable To guarantee effectual interface amid MDAs like Federal Universities the World Bank assisted to put into practice for competence, an effectual automated system for the Federal Government and which is user Friendly. (ERGP/Consultancy/06/2011) The Federal Universities in the TSA are to gain in the following ways to ensure observance to fiscal controls, responsibility and budget execution: i. augment the capacity of Federal Government to commence Central Control and monitor of receipt and payments in the MDAs. ii. Amplify the capacity to access in a row financial and operational performance. iii. Enhance internal controls to prevent and detect potential and actual fraud. iv. Augment the ability to access information on government's cash situation and fiscal performance STAKEHOLDERS TO TSA 1. The Federal Government of Nigeria as Chief Advocate / Recipient. 2. The State and Local Governments of Nigeria / recipient. 3. The MDAs as implementers, facilitators and recipients. 4. The Civil Servants as facilitators and recipients. 5. The Central Bank of Nigeria (CBN) as administrator over the General Receipt scheme. 6. The Deposit Money Banks as recieving or collecting and channeling agents (see collecting diagram). 7 .Organizations providing Receipt / Payment services a) Unified Payment Services Limited b) System Specs c) Interswitch d) NIBSS: Nigeria 8. Members of the home and intercontinental business community 9. Parties concerned in and / or online home cash transfer in electronic 10. The people as ultimate beneficiaries Fig 1: An overview of the Nigeria TSA design GENERALLY BENEFITS DERIVABLE TO ALL SECTORS ARE: a. Ensures full remittance of monies from all tiers of government. B. Assist inter-governmental financial reconciliations between Federal, State and Local Governments. c. Cutback in scam, corruption and financial irregularity. d. Enhancement in tracking precisely all receipts and providing audit trail. e. Has encouraging effects on fiscal and monetary management and reduces the fees on borrowings F. Real-time Accounting and Reporting in the Public Sector especially when integrated with e-Payment system is enhanced. g. Decline in the expenditure of Minting, Printing, transmission, dispensation and replacing currency notes as e-Receipts and e-collection. h. Reduction in socio economic threats associated with movements of huge amount of cash where most transmittal is e-based DEMERITS OF TSA'S ECOLLECTION In the face of the inundation of the copious benefits of the TSA e-collection structure, we could do with or know it possesses some disadvantages as follows: 1. Exchange and interception of payment, and diversion/hacking 2. Threat of identity pilfering 3. Infastructural absence, cyber attack and limitation. Example poor electricity, inadequate cyber safety measures. The CBN having seen the demerits above planned a PAYMENT STATEMENT VISION 2020 which would produce an electronic receipt infrastructure that would be countrywide employed and accepted as world rank (PSV 2020) to lessen the disadvantages above. The PSV 2020, is the pet project of the CBN and make available a framework to lessen the demerits outlined over: 1. Legislation, a less controversial legal structure underpins the payment infastructure 2. New payment scheme, NIBSS payment was facilitated for real time bank to bank fund transmittal and also mobile money 3. Infastructural improvement, the CBN has installed the RTGS. A Real Time Gross Settlement expense system, and a new central securities pool for government securities. Cheque amounts are capped at N10million and central mandate dispensation for direct debits. Also our ATM cards were migrated to EMV CARDS ie chip and pin and the NUBAN account scheme was also set up towards the TSA take off. Centralised and reduction in clearing cycle. Nigeria Central Switch NCS has become operational enabling interconnectivity and interoperability among deposit-taking institutions and licensed payment service providers. The NCS also facilitates inter-scheme card and mobile payments. Payment Terminal Service Aggregation, this form has been put in place to ease seamless and interoperable card payments, clear regulatory visibility for the retail payment communications, and reliable industry retail payment system data for analysis and planning function. A fiscally irresponsible government isn't able to maintain programs planned to provide fast respite to its citizens, and depending on the degree of the budgetary crisis, may not even be able to finance its own programs in ordinary period. When a government is fiscally irresponsible, its capacity to function efficiently is strictly limited. Developing situations and disasters classically arise without warning, even with the best planning, and a government needs to have quick entrance to reserve funds in order to intercede on reimbursement and be of assistance when needed. A fiscally irresponsible government isn't able to sustain programs designed to provide fast relief to its citizens, and depending on the extent of the budgetary problem, may not even be able to fund its own programs in ordinary times. This cause problems within, but it can also cause a lack of assurance on a global scale that can negatively impact everything from currency exchange rates to general economic stability. TREASURY SINGLE ACCOUNT AS A FISCAL TOOL. 1. A TSA scheme helps strengthen government cash balances, gives the ministry of finance / treasury supervision of all government cash flows, and brings progress in budget control and monitoring. 2. A TSA facilitate regular and effective scrutinize of government cash income by providing whole and appropriate information. 3. A TSA also ease fiscal, debt management, and monetary policy harmonization as well as better understanding of fiscal and banking information, which in turn develop the quality of fiscal data. 4. It also includes a moral contract to maintain a financially sound government for future generations on the understanding that a functional society is difficult to maintain without a financially secure government. 5. TSA creates financial transparency, which can reduce waste, expose fraud, and highlight areas of financial inefficiency 6. The set up of a TSA considerably reduces the government debt overhaul costs; lowers liquidity reserve needs, and helps make the most of the return on investments of excess cash (see IMF Working Paper WP/10/143 for a detailed description of benefits of a TSA system). 7. Finally the TSA setup increases government responsibility on fiscal policies which often begins with a balanced budget, this is a budget with no deficits and no surpluses. Sources: 1. Linkedin: Oyedele Taiwo, 2015, Treasury Single Account implications. (https://www.linkedin.com/pulse/treasury-single-account-implications-taiwo-oyedele).. 2. Office of the Accountant General of the Federation of Nigeria. 3. Treasury Single Account (in Nigeria) Issues and Implications: stable of MBA & Co (CharteredAccountants), Lagos 4. Torough Ternenge: Current Government Financial Reforms in Nigeria. 5. Fiscal Policy in Nigeria: Stable of MBA & Co (Chartered Accountants), Lagos. 6. IMF Working PaperWP/10/143. 7. Central Bank of Nigeria (2015), revised guidelines for compliance with TSA by banks in Nigeria. 8. S.Pattanayak and I. Fainboim, 2010, Treasury Single Account: Concept, Design and Implementation Issues, IMF working paper 10/143 (Washington: International Monetary Fund). (http://www.imf.org/external/pubs/cat/longres.cfm?sk=23927.0).